ESMA Grants Brexit Relief to UK-Based Clearing Houses

Following a review of UK-based central counterparties (CCPs) and central securities depositories (CSDs), the European Securities and Markets Authority (ESMA) has announced that in the event of a no-deal Brexit, three CCPs established in the UK – LCH Limited, ICE Clear Europe Limited and LME Clear Limited – will be recognised to provide their services in the European Union.

ESMA says it has adopted these recognition decisions in order to limit the risk of disruption in central clearing and to avoid any negative impact on the financial stability of the EU.

The authority had previously communicated that its Board of Supervisors supports continued access to UK CCPs and says that having assessed the applications and the information submitted by the three CCPs, and consulted the relevant authorities in accordance with EMIR, ESMA considers that the conditions for recognition under Article 25 of EMIR are met by the three CCPs in case of a on a no-deal Brexit. Therefore, it has adopted decisions to recognise the three CCPs as third country CCPs under EMIR.

The recognition decisions would take effect on the date following Brexit date, under a no-deal Brexit scenario.

The recognition process for UK-based CSDs is still ongoing, but ESMA notes that its Board of Supervisors also supports continued access to these bodies, but that the results will be published as soon as the process is finalised.